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As a beauty brand, one of the most significant challenges is determining your distribution strategy. It used to be simpler—you either launched in a department store with an exclusivity clause in your contract (if you were pursuing a high-end positioning in the marketplace) or in a drugstore (if you were pursuing a mass positioning). However, over the past 10 years or so, it seems that distribution is constantly shifting.

At the 2012 HBA Global Expo, a panel of beauty industry insiders—including Jani Friedman, vice president of new brand development for Guthy-Renker; Marcia Gaynor, general merchandise manager for beauty and Look Boutiques for Duane Reade and Walgreens; Jennifer Walsh, founder of Behind the Brand Media and The Beauty Bar; and Susan Yara, editorial video and interactive director of NewBeauty magazine—discussed the most recent beauty distribution trends, as well as where the highlights are showing through.

Having also previously moderated similarly retail-themed HBA panels in 2010 and 2011, I shared additional retail perspectives in an article titled “The Changing Face of Beauty Distribution” in the March 2012 issue of GCI magazine. Here, I would like to share with you what came of this year’s panel. As you will see, the only real constant continues to be change.

Beauty Retail in Numbers

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Friedman started the discussion by setting a context with some beauty industry retail numbers. Overall, there has been some recent growth, with numbers indicating skin care and color cosmetics (including nail care) are the categories growing the fastest. The stats indicated that beauty and personal care sales reached $63.1 billion in 2011, with the industry expected to achieve $72.6 billion by 2016.

Further, premium beauty is growing faster than mass, seeing an 8% rise in sales in 2011 versus the mass rise of 2.1% in the same time period.

In terms of channels, there were both similarities and contrasts between the data presented in 2012 and 2011. In 2012, as with 2011, e-commerce is growing the fastest. However, the direct channel seems to be seeing more of a setback in 2012 while department store beauty sales saw 7.4% growth in 2011, followed by pharmacies (+5.6%) and beauty specialist retailers (+5.2%). And like direct sellers, mass merchandisers underperformed.

Following the Trends

Following the stats and numbers breakdown, the panel looked at the most recent distribution trends that emerged during the past 12 months.

Increased use of video as a sales tool. As Yara’s NewBeauty title indicates, video is playing an increasing role in both the consumers’ shopping experiences and in the magazine industry. When asked about this development, Yara suggests this video reach is helping inch closer to online consumers being able to smell and touch products, which still eludes current online technology. Instead, consumers watch videos of day-to-day women applying creams, cosmetics, masks and other products in order to get a sense of the product’s texture and spreadability.

Furthermore, blogging is being replaced or complemented by vlogging, aka video blogging. In addition to providing more information, video also enhances the shopping experience. Per Yara, both raw iFlip videos and professionally edited ones are effective. And the more amateur videos, often created by “real women,” sometimes are even more influential.

The key takeaway is that it’s becoming more imperative for beauty brands to incorporate video into their online presence. It’s a way to connect and get closer to the “touch” than online retailing has ever been able to get.

Growth of the new type of masstige channel. Call it pharmacy, masstige, prestige or something else, but consumers are staying in designated retails channels less and less, hopping to the venue that provides the products and results they’re looking for most conveniently.

The Duane Reade Look Boutique concept, comparable to the traditional European pharmacy, offers niche beauty brands in an open-sell environment and with widespread distribution. The popularity of this concept is evident in the rapid rise of the Look Boutique, which debuted in October 2009 and now has a slew of locations, including high-profile placements such as at 40 Wall Street in New York, as well as in Walgreens locations. And according to Gaynor, the plan is to roll out more than 200 new Look Boutiques in the next few years.

Also per Gaynor, the key to success for this new retail concept is its focus on convenience and architecture. Under the same roof, yet in spaces that look and feel different, consumers can get prescriptions, laundry detergent, and lipstick, body wash, nail polish, moisturizer and more beauty options quickly and easily. Gaynor did note that she considers the Look Boutique retail venues prestige, given some of the higher-priced items offered—and apparently, many brands agreed. While three years ago, the retailer had to woo department store brands to the concept, now Gaynor finds more high-end brands are wooing her.

The success of the Duane Reade Look Boutique is particularly noteworthy given that earlier this year CVS announced its retreat from this type of retail channel with the closure of its Beauty 360 concepts. Indeed, before the first Look Boutique, CVS opened its prestige concept Beauty 360 in Washington, DC, in November 2008. Over the past four years, CVS opened 25 additional Beauty 360 locations, including many on the West Coast, but now all of these are closing.

Gaynor maintained the success of the Look Boutiques built on their smart development and interesting product mix, giving an edge to Duane Reade/Walgreens in this masstige category. Enforcing the Look Boutiques’ importance, in the March 30, 2012, edition of WWD, Joe Magnacca, president of daily living products and solutions at Walgreens, said, “Beauty is a strategic pillar in all of our stores. We have 27,000 beauty advisers in our stores and that’s a major commitment to the category.”

Also, with Walgreens’—which owns Duane Reade—recent acquisition of a 45% equity stake in Alliance Boots GmBH, it seems likely that this concept will grow even further. But this acquisition could also mean other changes in the beauty retail channel, including the possibility of more U.K. brands in Look Boutiques and other venues, as well as the possibility of Look Boutiques in Boots stores.

Retailers aggressively launching their own lines. While retailers have long developed their own proprietary brands, this phenomenon seems to be increasing lately, and particularly in skin care. Bluemercury recently launched M-61 Skincare, a nine-piece line CEO Marla Malcolm Beck coined as a “green cosmeceutical line”—namely, a line meant to bridge the high-tech and natural skin care categories. Priced between $19 and $92, M-61 is being distributed in Bluemercury boutiques and on the boutique’s website, and is expected to generate up to $3 million in its first year.

Similarly, Ulta, Sephora and CVS also expanded their own skin care lines in the past 12 months. Ulta recently launched its proprietary brand Ulta Skincare, to be distributed in all its 449 stores and on ulta.com, and the Sephora Collection Skincare was also launched on the retailer’s home turf, in its 300 stand-alone U.S. doors and inside more than 300 Sephora in JC Penney locations. Adding a bit of star power, CVS worked with actress Salma Hayek to launch her skin care line Nuance, again exclusively within the CVS chain.

What exactly this means for skin care brands remains to be seen, but it does indicate increased competition and the retailers’ belief that there is a spot in the marketplace for these brands. A distinct advantage of these skin care lines is their immediate and broad distribution, but skin care and retail are two very different businesses and areas of expertise, so tracking their popularity with consumers will certainly be something to watch.

Emergence of pop-up stores. While retailers are busy launching their own product lines, brands are busy launching their own retail formats. Not only their own retail boutiques (such as those created by brands such as Origins, Aveda and MAC, which have been around for several years), but also in less expensive, less permanent pop-up stores. This wave of retail has taken on a variety of forms.

And while this format may seem new, versions of it have been around for quite a long time. Panelist Walsh mentioned that back in 2001, she set up an early type of pop-up store—selling products from her car. That concept has evolved, and today it has been reinvented in roaming beauty trucks. After food trucks, several beauty brands—including Urban Decay, Bare Escentuals, and I Love… Cosmetics—have helped lead this feet-on-the-street trend.

A truer sense of the pop-up store was launched for the summer by Skyn Iceland. When asked about the motivation behind this move, Skyn Iceland founder and president Sarah Kugelman commented, “We wanted the opportunity to interact firsthand with our customer base, and what better way to do it than in the heart of New York City? Because stress can be a very personal issue and because it affects everyone’s skin in a different way, being able to communicate directly with customers and provide soothing solutions is invaluable.”

Gaining quite a bit of popularity and press attention lately, pop-up shops allow small brands to generate awareness without the long-term commitment to a physical location. Brands are able to saturate various markets in one year and get to know who their customers are in each region, which is useful in planning for growth.

Finally, there is the in-store version of the pop-up store. For example, beauty partnerships have been key to Target’s recent strategy, getting independent brands into the act—and into the hands of consumers. On May 6, in an initiative known as The Shops at Target, the mass retailer launched store-in-store partnerships with various smaller brands, including Cos Bar, a beauty boutique with multiple locations based in Aspen, Colorado.

Emergence of new retail formats. In addition to pop-up stores, new retail formats are emerging that blend magazines and traditional retail. For example, Glamour magazine and retailer C.O. Bigelow launched an m-commerce (magazine-commerce) wall in the U.S. in February 2012 at its New York location. Up for six days, this wall offered some of C.O. Bigelow customers’ favorites and integrated mobile technology, developed by SpyderLynk, that enabled shoppers to “snap and shop.”

More permanently, Sandow Media, the owner of NewBeauty magazine, purchased the worldwide rights to the Fred Segal brand name in 2012, and while the complete impact of this transaction remains to be fully understood, the first expression of this new joint venture can be seen in Santa Monica, California, at the fully renovated NewBeauty at Fred Segal beauty boutique. Indeed, Yara explains, this is Sandow’s way of bringing the magazine to life. Rather than displaying full lines on one shelf, the store looks like the actual magazine, with products arrange by category, for example the best 10 masks currently on the market. It’s a way to bring a selection of beauty products curated by editors to consumers, giving them tips, insights and additional information on the products they can choose.

In a similar vein, OpenSky also recently launched a beauty section on its site, which features the selections of beauty experts for a “social shopping” experience. Featuring beauty industry names such as Jerrod Blandino, dermatologist Dr. Fredric Brandt, Chandler Burr and many more, the site offers a new selection of self-curated products from these participants each week. Shoppers can communicate directly with the curators within OpenSky’s platform, as well as watch their videos and read their expert reviews created by them for each product.

Change and Evolution

As the retail trends discussed during the 2012 panel indicate, the beauty industry continues to be dynamic and things continue to change. For consumers, that means more ways to shop, more ways to experience a product and more ways to learn about a new brand. For brands, that means more work to do, more new technology (including video) to embrace, and more options to get beauty products in the hands and minds of the consumer.

Ultimately, there is no right or wrong way to launch a brand or distribute a product. What matters is finding an effective way to tell a genuine story across product packaging, marketing and distribution. Because, in the end, while consumers like products, they love stories.

Ada Polla is the co-creator of the Swiss antioxidant skin care line Alchimie Forever, which launched in the U.S. in 2004. Her strategic focus and implementation have yielded double-digit annual revenue growth for the company. She holds an MBA from Georgetown University, majored in art history and political science at Harvard University and graduated magna cum laude with a Bachelor of Arts degree in 1999. She is also a GCI magazine editorial advisor.